Inflation target to be revised

Permanent secretary Siripol Yodmuangcharoen said in an interview that the target is raised from 5-5.5 per cent, due mainly to the higher average oil price, from US$105 (Bt3,500) to $125 per barrel. It is calculated that if diesel retails at Bt45 per litre, against Bt25.6 in July last year, the consumer price index would be raised by 0.38 per cent.

 "However, the ministry may need to revise the annual inflation forecast for another round in the second half of the year, due to higher oil prices which may go beyond $150-$170 per barrel," said Siripol.

Inflation peaked at 8.9 per cent year on year last month, the highest rate in a decade. The ministry expects inflation for each remaining month may reach double-digit growth as oil prices gradually increase.

Several research houses anticipate inflation of 8 per cent this year. Though light, sweet crude for August delivery fell 41 cents on Friday to settle at $128.88 - well below its trading record of more than $147 a week earlier - there is no conclusion that the bubble has already burst.

The Commerce Ministry will adjust the inflation-calculation system by giving more weight to alternative energy in order to reflect the real costs of daily spending as consumers turn more to alternative fuels. This will help relieve inflation due to relatively lower prices of alternative fuel.

Oil prices account for 11.54 per cent of 373 products in the ministry's calculation basket. In 2002, the weight was only 5.3 per cent. Despite higher consumption, alternative energy sources such as liquefied petroleum gas (LPG) and natural gas for vehicles (NGV) have a weight of less than 4 per cent in the basket.

Siripol said the ministry would also cooperate with other government agencies to control 373 product items in its inflation calculation. For instance, the Interior Ministry could increase efficiency on the control of rental costs as these are a major factor in consumers' daily expenses. The ministry will apply this measure to other products such as student uniforms, telephone fees and accommodation.